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ESMA Says Implement MiFID II with Draft Rules, FIX Calls for Clarity

If you missed the FIX EMEA event last week, there is something you need to know – while the final details of Markets in Financial Instruments Directive II (MiFID II) have not yet been ironed out and the directive’s final rules are not yet published in the Official Journal of the European Journal, there is no getting away from the fact that the rules will be legally binding on January 3, 2018, that regulators will not look lightly on breaches, and that asset managers claiming to be outside the scope of the rules need to make a reality check.

‘Dealing with MiFID II in a Global Regulatory Framework’ was the focus of a FIX EMEA panel with speakers including Rodrigo Buenaventura, head of markets department at the European Securities and Markets Authority (ESMA); Matthew Coupe, co-chair of the regional committee and EMEA regulatory subcommittee at FIX Trading Community, and a director at Barclays Investment Bank; Philippe Guillot, executive director, markets directorate, Autorité des marchés financiers (AMF); Rebecca Healey, co-chair of the EMEA regulatory subcommittee at FIX Trading Community, and head of EMEA market structure and strategy at Liquidnet; and Dr Kay Swinburne, MEP for Wales.

The regulators on the panel acknowledged that while there are still items to adjust in the Level 2 standards for MiFID II and that final rules have not yet been legally adopted, firms should prepare for compliance using the draft rules.

Issues still requiring detail include whether OTC derivatives will be considered as trading on a trading venue, plans and processes to make ISINs work for derivatives, and a Unique Product Identifier (UPI) that may or may not be an ISIN. Proportionality and equivalence also require further input and review.

From the market participant perspective, panel members discussed the enormity of MiFID II, suggesting it may be better as five or six pieces of legislation, but were confident that both the legislation and industry response would improve over time with better clarity and data. Compliance will not be perfect on January 3, 2018, but it will evolve over time.

Reflecting audience polls showing that 70% of respondents don’t believe they have enough information to implement MiFID II today and 79% saying the impact of MiFID II on market structure is their key concern, the panel closed with a call from FIX to the regulators to provide access to experts and consider a better mechanism than Q&As to answer market participants’ questions in a more real-time manner.

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